Houstonians seek alternative investments in energy, real estate

Invesco Ltd., Houston's largest money management firm with nearly $340 billion in local assets under management, held an investor's conference for its top clients on June 4 and one message was clear: Alternative investments remain a growing field in the wake of the 2008 financial meltdown.

"There’s nothing new about it, but post financial crisis, it seems to have taken on a new life,” said Marty Flanagan, president and CEO of Invesco. “So many of our clients are looking for ways to lower volatility, protect capital, while at the same time increase income.”

And Texas is a key market for alternative investing opportunities through real estate and energy.

“The Houston economy is benefiting from the boom in the energy sector, which is having a positive effect on real estate performance," said Scott Dennis, managing director and CEO of Dallas-based Invesco Real Estate. "Anecdotally, we manage $34 billion in direct real estate worldwide, and two of our top-performing assets are in Houston, Texas.”

Dennis noted that much of the growth in Houston real estate is being driven by the estimated 150,000 people who are moving to Houston this year, tightening single-family home stock to about two months' of supply.

Invesco advisers also see the shale boom fundamentally changing investment options in the energy sector.

“The shale revolution is really only 7 to 8 years old, even though the technology has been around a bit longer," said Stephen Toy, senior managing director and co-head of WL Ross & Co. LLC, Invesco’s private equity affiliate. "As we think through that, there’s been a tectonic change in terms of what natural gas has done. It’s created a new paradigm in terms of manufacturing in the US. It’s sprung a renaissance in terms of the chemicals industry. It’s driving infrastructure spend."

Toy also thinks that the shale revolution is so new that its full impact has yet to be realized.

"The parallel we draw to it at WL Ross is the Internet revolution," he said. "Big box real estate, strip malls, traditional malls all being transformed by the Internet. We think energy is going to do the same thing.”